NO.026

STANDARD AND POORS UPGRADES AUSTRALIA

The Government welcomes the announcement today by Standard and Poors of its upgrading

of Australia’s foreign currency debt from AA to AA+. The announcement constitutes a

strong endorsement by an independent body of the Government’s economic policy

achievements over the last three years.

Standard and Poors pay tribute to Australia’s “favourable economic

performance and prospects, as a result of economic reforms, reinforcing resilience,

flexibility, diversity and competitiveness”.

In announcing the upgrade Standard and Poors emphasise the importance of the

Government’s continued commitment to fiscal consolidation and debt reduction. We have

now a transparent medium term policy framework that is delivering strong budget surpluses,

narrowing the gap between domestic saving and investment and hence the current account

deficit.

This announcement is a strong endorsement of the Budget that I delivered just a week

ago.

Standard and Poors also emphasise the importance of Australia’s medium term

framework for monetary policy which, they note, has established a low inflation

environment in Australia.

And they pay tribute to the Government’s strong record of structural reform in the

labour market, in product markets and to the Government’s privatisation program

– including the sale of the remaining two-thirds of Telstra.

The AA+ rating is the second highest rating that Standard and Poors apply to foreign

currency debt. Australia last enjoyed this rating in 1989. Australia’s rating was

downgraded then under the Hawke-Keating Government. The Labor Government also presided

over the loss of Australia’s AAA rating in 1986.

Today’s announcement was very well received by the fund managers and institutional

investors with whom I have been meeting in Hong Kong.

This announcement should be welcomed by all Australians. It signals recognition by the

international community of Australia’s ability to sustain strong, low inflationary,

growth with continued low interest rates.

18 May 1999

Hong Kong